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Frontier seeing clear skies

A Frontier Airlines jetliner waits for passengers, baggage and crew ar a jetway at Denver International Airport (DIA) Friday morning, 12/2/2005. From assignment: "Time is money in the airline industry, where a dozen tiny cost-cutting measures can make the difference between solvency and bankruptcy." (Digital | Jerry Cleveland)

Frontier Airlines could emerge from bankruptcy as early as Sept. 17, according to the Denver-based carrier's chief executive.

And though most jobs with the airline probably will be preserved, exactly where certain facilities will be located remains to be seen.

Republic Airways Holdings won a bankruptcy court auction for Frontier on Thursday with a $108.75 million bid, prevailing over Southwest Airlines' offer of more than $170 million.

Frontier's name and brand are maintained under the Republic deal, which still must be approved by the bankruptcy court. Southwest had a two-year plan to fold Frontier into its system.

Frontier CEO Sean Menke said Friday that Republic's bid was more attractive in part because Republic could close the deal and "close it sooner rather than later."

Republic also sweetened the pot by giving up a claim on money owed to it by Frontier. Labor issues sidelined Southwest's offer.

Under Republic's plan, functions such as maintenance and office work "could shift elsewhere" under the new organizational arrangement between Frontier, Republic and Midwest airlines, which Republic acquired July 31.

"Nothing has been absolutely decided," Menke said in a conference call. Efficiencies of "certain facilities" will be sought, he said.

Bryan Bedford, Republic's chief executive, said Denver's taxes on maintenance activities, such as bringing in a part to repair an aircraft, are disincentives for locating facilities here.

"From a jobs perspective, we need the (Frontier) people, but it's a question of where you want them," Bedford said.

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"In this industry, you can't do work where you are economically disincentized."

Bedford said he plans to sit down next week with city and state officials, who he said "have made a very good case about being open-minded," to discuss whether something can be done.

"There are good intentions on both sides," Bedford said. "The good news is the vast majority of the Frontier jobs along with the brand are preserved."

Menke said Frontier has been contacted by state economic development officials from Colorado; Wisconsin, where Midwest is based; and Indiana, home to Republic.

Local and state officials would love to lure the new airline organization's maintenance and headquarters to Denver.

"We're going to do everything possible to try to facilitate keeping them in Colorado," said Don Marostica, director of the Colorado Office of Economic Development and International Trade.

Marostica said he planned to spend the weekend studying whether state aviation-fuels tax money could be used to help build a facility.

"I have a white board in my office, and they're at the top," Marostica said.

For customers, "the changes will be underwhelming," said aviation analyst Mike Boyd of the Evergreen-based Boyd Group.

Boyd predicted there will be some growth for Frontier, but not right away.

"Nobody is growing," he noted, including Southwest, which hasn't cut back in Denver but is redeploying service throughout its system.

"Denver is a very competitive marketplace, and having three competitors will continue to put downward pressure on revenues," Frontier's Menke said. "Our cost structure is well below United's and below Southwest's."

Menke said Frontier has worked hard to cut costs since it filed for bankruptcy in April 2008, and recently posted its eighth-consecutive profitable month.

Bedford said he became interested in acquiring Frontier "as we saw the work they were doing to turn things around. That's when the wheels started turning around."

The Republic deal was attractive in several ways, Menke said.

Republic already had antitrust clearance on the transaction, while Southwest executives estimated it would have taken four to six months for the U.S. Department of Justice to review its offer.

A condition that the Frontier and Southwest pilots unions had to agree on seniority rights also threatened to drag out the situation.

The night before the auction, the two groups hit an impasse. Southwest's bid was deemed unacceptable by Frontier leaders and creditors, and it was withdrawn.

Republic's offer also was more attractive to Frontier's other creditors. By dropping its $150 million claim for a terminated flying contract, Republic bumped the return for creditors from about 9 cents on the dollar to 18 cents on the dollar.

Southwest's bid would have paid creditors about 12 cents on the dollar.

Bedford envisions a new paradigm under the new alliance.

Frontier's strength is in the West, and Midwest's is in the East, he said. Frontier's larger Airbuses would be assigned long hauls to the West Coast and Florida, while Midwest's Boeing 717s would feed closer-in routes.

"If we go out six months, the right aircraft will be flying in the right markets," Bedford said.

Bedford admitted he hasn't spent much time thinking about how Lynx Aviation, Frontier's regional subsidiary, fits into the picture, although he supports the need for service to mountain towns such as Durango and Montrose.

People will say that an airline is just a commodity and that they jump on the Internet and get the cheapest flight, Bedford said.

"But what I see with Midwest and Frontier is a tremendous amount of loyalty," Bedford said. "That is special."

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